Watch Tuesday morning’s CPI reading for signs that the recent inflation surge is abating

Americans are still paying higher prices for takeout food, used cars, furniture and many other goods and services, but the biggest burst of U.S. inflation in several decades might be close to a peak.

To be sure, prices are still on the rise. Economists polled by the Wall Street Journal estimate the cost of living, as measured by the consumer price index, rose 0.4% in August. The latest CPI reading is scheduled for release Tuesday morning.

While an increase of that magnitude would be the smallest since February, it would still be twice as high as the monthly average over the past two decades.

Read: Delta and shortages trip up the U.S. economy

Over the past year, moreover, consumer prices have surged by 5.4% to mark the biggest increase since 2008. Other inflation measures indicate prices have risen at the fastest clip since the early 1990s.

The sharp increase in prices mostly stems from a mismatch between supply and demand spawned by the pandemic. Demand is high owing to massive government stimulus and a rapidly recovering economy, but businesses can’t produce enough to keep up because of persistent shortages of labor and supplies.

Yet emerging strands of evidence suggest price pressures are starting to relent.

The cost of used cars and trucks, for example, barely rose in July, and prices are expected to decline in the months ahead. Used-vehicle prices skyrocketed in the spring and they were up 42% on a year-on-year basis. That’s been one of the biggest contributors to the surge in U.S. inflation.

The advent of the delta variant of the virus causing COVID-19, meanwhile, has caused some consumers to shy away from crowds again. Hotel bookings, restaurant reservations and air travel fell in August. “The rebound in COVID cases likely cooled price increases for discretionary services, such as lodging away from home and airfares,” said senior economist Sam Bullard of Wells Fargo.

If prices pressured have peaked, the yearly rate of inflation should also start to recede soon. It’s just not going to happen quickly.

Economists predict inflation will likely exceed 4% for all of 2021, putting it well above the Federal Reserve’s 2% target.

How quickly and how much the rate of inflation subsides in 2022 is a matter of intense debate.

Energy prices are unlikely to level off much, for one thing, and extreme weather could keep the cost of food on the higher side through early 2022. Nor is it reasonable to expect the costs of housing and medical care to remain tame.

Labor costs are also increasing. Businesses have had to raise pay up to attract workers, and it’s probably only a matter of time before they pass along those costs to customers.

Keep a close eye Tuesday morning on the so-called core rate of inflation, a separate CPI index that strips out food and energy. Investors view the core rate as a better gauge of the true rate of inflation because food and gas prices are so up-and-down. Forecasters, on average, expect a 0.3% increase in the core CPI reading from August.

Although still above normal, a 0.3% increase would tug the rise in the core rate over the past year down to 4.2% from 4.3%. It would be a small victory for the Fed, but a victory nonetheless.

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